The Stars And Stripes Nonappropriated Fund. Financial Report September 30, 2010

Transcription

1 The Stars And Stripes Nonappropriated Fund Financial Report September 30, 2010

2 Contents Independent Auditor's Report On The Financial Statements Financial Statements Balance Sheets Statements Of Operations And Changes In Fund Balance Statements Of Cash Flows Notes To Financial Statements Independent Auditor's Report On Internal Control Over Financial Reporting And On Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards

3 McGiad rey & Pullen, LLP Certified Public Accountants I McGiadrey Independent Auditor's Report To the Commander/Publisher The Stars and Stripes Washington, D.C. We have audited the accompanying balance sheet of the nonappropriated fund (NAF) of The Stars and Stripes (S&S) as of September 30, 2010, and the related statements of operations and changes in fund balance and cash flows for the year then ended. These financial statements are the responsibility of S&S's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of S&S for the year ended September 30, 2009, were audited by other auditors whose report, dated February 12, 2010, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of The Stars and Stripes' internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the non appropriated fund of The Stars and Stripes as of September 30, 2010, and the results of its operations and changes in fund balance and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report, dated February 24, 2011, on our consideration of the nonappropriated fund of The Stars and Stripes' internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The report on internal control over financial reporting and tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters of S&S for the year ended September 30, 2009, were reported on by other auditors whose report is an integral part of their audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of their audit. Vienna, Virginia February 24, 2011 MtGiadrey I> the brand under whkh R$M McGiadrey, Inc. and McGiadrey & Pullen, llp serw ch mt.. buslness M@ds. The rwo ftrms operate ~ s separate t@gal entitles In an alternatlvl! practica s.tructure. 1 Member of RSM lnt~rnational network. a n<>twork of Independent ac:counting. talt and comultlng firms.

4 The Stars And Stripes Nonappropriated Fund Balance Sheets September 30, 2010 And 2009 Assets Current Assets Cash $ 18,605,439 $ 11,776,838 Less cash - sinking fund (643,116) (323,960) Net cash 17,962,323 11,452,878 Receivables Trade, net of allowance for doubtful accounts of (2010- $382,330; $625,233) 2,103,368 2,564,099 Nontrade 2,976,849 8,265,964 Inventories 153, ,919 Prepaids and other current assets 406, ,957 Total current assets 23,602,344 23,099,817 Property And Equipment, net 4,516,175 5,032,711 Other Assets Intangible asset 85,000 85,000 Cash - sinking fund 643, ,960 Total other assets 728, ,960 Total assets $ 28,846,635 $ 28,541,488 See Notes To Financial Statements. 2

5 Liabilities And Fund Balance Current Liabilities Accounts payable $ 2,188,628 $ 2,576,038 Accrued expenses 1,286,766 1,095,043 Accrued payroll 1,712,863 1,209,040 Deferred revenue and deposits 126,333 1,272,886 Total current liabilities 5,314,590 6,153,007 Long-Term Liabilities Accrued moving and return travel 923,692 1,028,490 Total liabilities 6,238,282 7,181,497 Fund Balance 22,608,353 21,359,991 Total liabilities and fund balance $ 28,846,635 $ 28,541,488 3

6 The Stars And Stripes Nonappropriated Fund Statements Of Operations And Changes In Fund Balance Years Ended September 30, 2010 And 2009 Revenue: Advertising Newspaper circulation Other newspapers Unit newspapers Job printing Interest income Other income Total revenue $ ,540,665 $ 13,896,823 11,644,439 9,158, , ,060 62,683 54,563 1,184,047 1,153, , , ,850 1,328,016 27,320,933 26,209,568 Expenses: Editorial Production Other newspapers Advertising Job printing Selling and distribution General and administrative Total expenses Net change in fund balance 3,536,115 4,004,850 8,323,938 4,615, , ,799 5,274,370 6,294, , ,887 2,977,234 4,853,141 5,013,155 4,971,277 26,072,571 25,614,595 1,248, ,973 Fund balance: Beginning Ending $ 21,359,991 20,765,018 22,608,353 $ 21,359,991 See Notes To Financial Statements. 4

7 The Stars And Stripes Nonappropriated Fund Statements Of Cash Flows Years Ended September 30, 2010 And Cash Flows From Operating Activities Net change in fund balance $ 1,248,362 $ 594,973 Adjustments to reconcile net change in fund balance to net cash provided by operating activities: Depreciation 1,168,513 1,434,643 Loss on disposal 1,843 41,897 Changes in assets and liabilities: (Increase) decrease in: Trade receivables 460, ,856 Nontrade receivables (280,798) 130,790 Inventories (18,682) (14,532) Prepaids and other current assets 275,754 (127,002) Increase (decrease) in: Accounts payable (387,410) (312,647) Accrued expenses 191,723 (408,836) Accrued payroll 503,823 78,169 Deferred revenue and deposits (1,146,553) (1,191,322) Accrued moving and return travel (104,798) (223,958) Net cash provided by operating activities 1,912, ,031 Cash Flows From Investing Activities Additions to property and equipment (653,820) (1,327,423) Proceeds from sale of property and equipment 5,784 MWR USA/UFM reimbursement, net 5,569,913 (808,260) Net cash provided by (used in) investing activities 4,916,093 (2, 129,899) Net increase {decrease) in cash 6,828,601 (1,779,868) Cash Beginning 11,776,838 13,556,706 Ending $ 18,605,439 $ 11,776,838 See Notes To Financial Statements. 5

8 The Stars And Stripes Nonappropriated Fund Notes To Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies Nature of activities: The Stars and Stripes (S&S) is a Category B revenue producing nonappropriated fund instrumentality of the United States Government. Its mission is to publish and distribute daily newspapers to the U.S. military community located outside the continental United States. A summary of S&S's significant accounting policies follows: Basis of accounting: The S&S presents its financial statements under the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America. Cash: The statement of cash flows is prepared on the basis of total cash, including sinking fund cash (See Note 2). Financial credit risk: The S&S maintains cash balances in bank deposit accounts, which, at times, may exceed federally insured limits. The S&S has not experienced any losses in such accounts. Receivables: Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. No interest is charged on outstanding receivables. Inventories: Newsprint and other inventories are stated at the lower of cost (first-in, first-out method) or market. Intangible asset: The intangible asset is a trademark that has an indefinite life and therefore, is not amortized in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350, Intangibles- Goodwill and Other. Property and equipment: Stars and Stripes property and equipment are stated at cost. Stars and Stripes capitalizes all property and equipment, purchased with nonappropriated funds, with useful lives in excess of one year and values over $2,500. Depreciation is provided over the estimated useful lives of the respective assets using the straight-line method. The range of lives over which property and equipment are being depreciated is as follows: Buildings Buildings improvements Furniture, fixtures and equipment Electronic equipment Vehicles 15 to 40 years 5 to 30 years 2 to 10 years 2 to 10 years 2 to 7 years 6

9 The Stars And Stripes Nonappropriated Fund Notes To Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies {Continued) Valuation of long-lived assets: The Stars and Stripes accounts for the valuation of long-lived assets and certain identifiable intangible assets by reviewing for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reportable at the lower of the carrying amount or fair value, less costs to sell. Revenue recognition: Circulation revenue for newspapers sold directly to subscribers is based upon the retail rate. Circulation revenue for newspapers sold to independent newspaper distributors, which are subject to returns, is based upon the wholesale rate. Estimated returns are recognized as a reduction in circulation revenue at the time the newspaper is published. Returns are estimated based upon historical return rates and are adjusted based on the actual returns. Newspaper subscription revenue is recognized based upon the publication date of the newspaper. Revenues from prepaid newspaper subscriptions are deferred and are included in circulation revenue on a pro-rata basis over the term of the subscription. Newspaper advertising revenue is recorded, net of agency commissions, when the advertisements are published in the newspaper. Website advertising revenue is recognized ratably over the contract period or as services are delivered, as appropriate. Rebates are recorded throughout the year as a reduction to advertising revenue based upon contract performance. Foreign currency translation: S&S's functional currency is the U.S. dollar. Sales and expenses transacted in foreign currencies are translated at the average exchange rate in effect during each month. All realized and unrealized exchange gains or losses are included in results of operations. Balances in foreign currencies are translated into U.S. dollars using the rate applicable at the balance sheet date. Moving and return travel: U.S. employees hired from the Continental United States (CONUS) are provided with allowances for transportation of persons and household goods from and back to the United States. At September 30,2010 and 2009, S&S has accrued $923,692 and $1,028,490, respectively, for such allowances. Home leave and allowances: Employees are entitled to home leave, vacation, and sick leave allowances. These are based on prescribed formulas which allow for the carryover of unlimited amounts of sick leave, up to 30 days of vacation leave for CONUS employees, and up to 45 days of vacation leave for outside CONUS employees. Certain local national employees can earn certain severance leave based on contractual terms and formulas. Direct appropriated fund support: S&S receives certain support from U.S. Government Appropriated Fund (APF) activities without charge. This support is principally provided through the use of land and buildings, U.S. Military personnel assigned to S&S billets, and in the form of utilities, maintenance service, security, American Post Office transportation of bulk mail, and second destination transportation costs for delivery of newspapers. The value of this support is not readily available on a timely basis, nor is it susceptible to verification and therefore, is not disclosed in the financial statements. Direct support that is capable of measurement consisted of approximately $965,428 and $822,385 for rent, remote printing, shipping, maintenance, equipment, and communication costs during the years ended September 30, 2010 and 2009, respectively. All direct appropriated fund support is excluded from the nonappropriated fund financial statements. 7

10 The Stars And Stripes Nonappropriated Fund Notes To Financial Statements Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Uniform Funding and Management (UFM) and Morale. Welfare. and Recreation USA Program (MWR USA): S&S received appropriated fund support through the MWR USA program. This program reimbursed the nonappropriated fund for authorized expenditures in providing appropriated fund services. UFM was fully implemented as an Army-wide MWR initiative during 2007 and has therefore been adopted by S&S. It is an alternative means of executing fund support and provides for appropriated fund cashflow to the nonappropriated fund in advance of eligible appropriate fund expenditures, based on an executed memorandum of agreement. Unexpended UFM amounts, if any, are recorded as unearned income in the balance sheet. Authorized services and expenditures include personnel services, supplies, newsprint purchases, furniture, fixtures, and equipment. During the years ended September 30, 2010 and 2009, S&S received appropriated fund support of approximately $22,400,000 and $24,700,000, of which $2,852,942 and $8,074,345 was included in nontrade receivables at September 30, 2010 and 2009, respectively. At September 30, 2009, $1,094,426 of unearned UFM is included in deferred revenue and deposits on the accompanying balance sheet. There was no unearned UFM at September 30, All appropriated fund support is excluded from the statement of operations and changes in fund balance. Foreign National Employees Separation Pay Account (FNESPA): Appropriated funds are provided to the Foreign National Employees Separation Pay Account (FNESPA) for future European local national employee severance payment requirements. All severance payments for European local national employees will be funded with appropriated funds. Income taxes: As an NAF instrumentality of the U.S. Government, S&S is exempt from the payment of federal income taxes. Further, S&S is under the jurisdiction of various Status of Forces Agreements and is exempt from payment of income and other taxes within the foreign countries in which it operates. Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications: Certain items in the 2009 financial statements have been reclassified to conform to the presentation. Such reclassifications have no effect on net operations as previously reported. Subsequent events: The S&S has evaluated subsequent events through February 24, 2011, the date on which the financial statements were available to be issued. Management has determined that there are no such subsequent events to report. 8

11 The Stars And Stripes Nonappropriated Fund Notes To Financial Statements Note 2. Cash On Deposit With The United States Army Banking And Investment Fund (ABIF) Included in the cash balances of $18,605,439 and $11,776,838 as of September 30, 2010 and 2009, respectively, was $17,298,614 and $10,389,939, respectively, maintained in the United States Army Banking and Investment Fund (ABIF). The ABIF acts as a pooling agent for all Army and certain Department of Defense nonappropriated activities and invests principally in the U.S. Treasury Securities, U.S. Government agency securities, and certificates of deposit. The rate of interest paid to depositors is determined periodically by ABIF management, and averaged 1.5% and 2.3% during the years ended September 30, 2010 and 2009, respectively. S&S is required by regulations to maintain a minimum cash balance adequate to fund all planned and projected capital expenditures. Management has determined that $643,116 and $323,960, included in the ABIF balance at September 30, 2010 and 2009, respectively, was set aside as sinking fund cash for this purpose. Note 3. Inventories Inventories consist of the following as of September 30, 2010 and 2009: News print and news ink Supplies Total inventories $ $ 75,618 $ 77, ,601 $ 49,278 85, ,919 As discussed in Note 1 to the financial statements, appropriated fund support is provided for the purchase of newsprint inventory. Note 4. Property And Equipment Property and equipment is stated at historical cost and consists of the following as of September 30, 2010 and 2009: Buildings and improvements $ 871,225 $ 853,394 Furniture, fixtures and equipment 6,576,893 5,754,527 Electronic equipment 10,513, '138,853 Vehicles 1,291,045 1,276,343 Construction-in-progress 47,320 33,141 19,299,757 19,056,258 Less accumulated depreciation 14,783,582 14,023,547 $ 4,516,175 $ 5,032,711 9

12 The Stars And Stripes Nonappropriated Fund Notes To Financial Statements Note 5. Government Of Japan Cost Sharing Agreement In 1991, U.S. Forces Japan (USFJ) entered into the Indirect Hire Agreement (the Agreement) with the Government of Japan (GOJ), whereby, GOJ would reimburse USFJ for labor costs of Japanese local national workers covered under the Agreement, up to a budgeted limit computed based on headcount and average salary. These employees are now paid directly by GOJ. Furthermore, S&S obtained the services of Japanese local nationals (MLC employees) who were paid directly by GOJ. The total benefit to S&S, in salary terms, was estimated to be approximately $9,550,000 and $9,331,000 in2010 and 2009, respectively. These costs are not included in the nonappropriated fund financial statements. The Japanese local national employees employed under the Agreement are eligible for a Comparative Termination Allowance to be paid upon their separation from employment. The allowance is computed based on a formula stipulated in the Agreement and is subject to reimbursement by GOJ. Note 6. Retirement And 401 (k) Savings Plans S&S participates in the U.S. Army Nonappropriated Fund Employee Defined Benefit Retirement Plan and 401 (k) Savings Plan and contributes to the Plans for S&S employees. The employer rate of contribution was 6.5% of salary during the years ended September 30, 2010 and S&S incurred costs related to the Retirement Plan of $997,414 and $912,101 for the years ended September 30, 2010 and 2009, respectively, and incurred costs related to the 401 (k) Savings Plan of $318,642 and $319,339 for the years ended September 30, 2010 and A portion of these expenses were paid for with appropriated funds and have been excluded from the non-appropriated fund financial statements. The contributions to the U.S. Army Nonappropriated Fund Employee Defined Benefit Retirement Plan have been forecasted to be 7.0% of the salaries of eligible employees during the year ending September 30, The required rate of employer's contribution may be increased in the future periods to make up for a shortfall necessary to maintain the level of defined benefit the plan is obligated to pay. Note 7. Contingencies S&S is involved in legal proceedings arising in the ordinary course of business. In the opinion of management, the outcome of such proceedings will have no material effect on the financial statements. 10

13 McGiadrey & Pullen, l l P Certified Public Accountants I McGiadrey Independent Auditor's Report On Internal Control Over Financial Reporting And On Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards To the Commander/Publisher The Stars and Stripes Washington, D.C. We have audited the financial statements of the nonappropriated fund (NAF) of The Stars and Stripes (S&S), as of and for the year ended September 30, 2010, and have issued our report thereon dated February 24, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered S&S's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of S&S's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of S&S's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. There were no previously reported observations and recommendations made by the prior auditors to follow up on during the current reporting period. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance And Other Matters As part of obtaining reasonable assurance about whether S&S's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 11 McGiadrey Is the brand under which RSM McGiadrey, tnc. and McGiadti!Y & PuUen, LLP Sf!rve dimts' busln..ss needs. The two firms o~ra t e as ~parate lega-l entltle:s tn an atternauw ptactice structure. M<!mbet <>I RSM lntl!tnational network, a network of l nd~tlde.ot accounting, t.l: ~t and <;on suiting fim1s.

14 We noted certain matters that we reported to management of S&S in a separate letter dated February 24, This report is intended for the information of management, the Commander/Publisher and The Army audit Agency and is not intended to be and should not be used by anyone other than those specified parties. Vienna, Virginia February 24,

15 (Army) Supplemental Mission Program Joint Service Stars and Stripes Balance Sheet For the Period Ending 30 September 2010 (FY 10) ASSETS Current Assets Cash/1 nvestments Receivables Inventories Other Current Assets Total Current Assets Noncurrent Assets NAFI Owned Fixed Assets Less: Accumulated Depreciation Net NAFI Owned Fixed Assets Government Titled Fixed Assets 1 Less: Accumulated Depreciation Net Government Titled Fixed Assets Other Total Noncurrent Assets Total Assets LIABILITIES & NET WORTH Current Liabilities Accounts Payable Other Total Current Liabilities Long Term Liabilities Loans Payable Other Total Long Term Liabilities Total Liabilities Net Worth Total Liabilities & Net Worth $18,605 5, $24,245 $19,385 14,784 $4,601 $0 $0 $0 0 $4,601 $28,847 $2,189 3,126 $5,315 $0 924 $924 $6,238 $22,608 $28,847 1 Real property and other fixed assets financed with Nonappropriated Funds and titled with the U.S. government. Notes to Balance Sheet: Stars & Stripes has no Government Titled Assets 26

16 (Army) Supplemental Mission Program - Joint Service Stars and Stripe: Reconciliation of Net Worth For the Period Ending 30 September 2010 (FY 1 0) Net Worth, Beginning: $21,513 Additions to Net Worth: Net Income $1,248 Grants Received Other Increases (specify) 1 0 Total Additions $1,248 Reductions to Net Worth: Net Loss $0 Grants Disbursed Other Decreases (specify) Total Reductions $153 Net Addition/Reduction to Net Worth 1,095 Net Worth, Ending $22,608 27

17 (Army) Supplemental Mission Program Joint Service Stars and Stripes Statement of Income and Expense For the Period Ending 30 September 2010 (FY 10) Current Year {FY Percent of Amount Revenue Prior Year {FY 2009! Percent of Amount Revenue Sales Cost of Goods Sold(% of Sales) (Schedule A) Gross Margin Other Operating Income: Participation Fees and Charges Dues and Assessments Concessionaire Payments Other Total Other Operating Income GROSS OPERATING INCOME Operating Expenses (Schedule A) OPERATING MARGIN Other Income: Dividends Grants Other Total Non-Operating Income Other Expense (Schedule A) NET INCOME BEFORE EXTRAORDINARY ITEMS Extraordinary Income Extraordinary Expense Items (Schedule A) NET INCOME $26,650 $6,881 $19,769 $0 $0 $19,769 $19,344 $425 $823 $823 $1,248 $1, % 25.8% 74.2% 72.0% 70.4% 1.5% 3.0% 3.0% 4.5% 4.5% $24, % $8, % $15, % $0 $0 $15, % $17, % ~$1,224~ -4.6% $1, % $1, % $ % $ % USA support eliminated from : Other Operating Income and Operating Expenses $ 23,472 $ 24,680 Total Revenue $ 27,473 $ 26,507 Total Expenses (Schedule A) $ 26,225 $ 25,758 28

18 (Army) Supplemental Mission Program - Joint Service Stars and Stripes Schedule A to the Income and Expense Statement For the Period Ending 30 September 2010 (FY 1 0) ($in thousands) Cost Expense Captions APF NAF Military Personnel Civilian Personnel (salaries & wages) Civilian Personnel (services & benefits) Utilities & Rents Communications Sustainment, Restoration and Modernization (including APF minor construction) Supplies & Equipment Contractual Services Travel of Personnel Transportation of Things Reimbursed Common Support NAF Depreciation All Other Expenses TOTAL EXPENSE n/a 26 $3,248 2, , ,805 $24,413 $19,344 Capital Expenditure Captions Construction of Facilities: APF (MILCON) NAF Equipment (investment type) 51 n/a TOTAL COSTS (less depreciation) $24,464 $18,694 - See Cost of Goods Sold Schedule A for details - MILPER includes both Army & Other Servides. 29

19 (Army) Supplemental Mission Program - Joint Service Stars and Stripes Schedule A to the Income and Expense Statement- COGS For the Period Ending 30 September 2010 (FY10) ($in thousands) Cost Expense Captions APF NAF Military Personnel n/a Civilian Personnel (salaries & wages) Civilian Personnel (services & benefits) $ Utilities & Rents 155 Communications 280 Sustainment, Restoration and 258 Supplies & Equipment 58 Contractual Services 0 Travel of Personnel 223 Transportation of Things 46 Reimbursed Common Support NAF Depreciation 519 All Other Expenses 4,677 TOTAL EXPENSE $0 $6,881 CaE;!ital ExE;!enditure CaE;!tions Construction of Facilities: APF (MILCON) n/a NAF $0 Equipment (investment type) $0 TOTAL COSTS (less depreciation) $0 $6,362 The above expense items have been included in Cost of Goods Sold 30

20 (Army) Supplemental Mission Program - Joint Service Stars and Stripes Statement of Cash Flows For the Period Ending 30 September 2010 (FY 1 0) Current Year Prior Year Operating Activities: Net Income $1,248 $749 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization Loss on Disposal of Fixed Assets Changes in assets and liabilities: Decrease (increase) in accounts receivable Decrease (increase) in inventories Decrease (increase) in prepaid expenses Increase (decrease) in accounts payable Increase (decrease) in unearned income Increase (decrease) in other current liabilities Other (specify) Total Adjustments Net Cash Provided by (Used In) Operating Actities $1 '169 $6,148 ($19) $463 ($387) ($43) ($944) $0 $6,386 $7,634 $1, (15) (95) (313) (80) (2,508) 0 ~$953~ ($204) Investing Activities: (Purchase of Fixed Assets) Proceeds from the Sale of Fixed Assets Other (Specify)< 1 > Net Cash Used in Investing Activities ($652) $0 $0 ($652) ($1,279) 0 0 ($1,279) Financing Activities: Net Borrowing (Specify) (Payment of Dividends) Capital Grants Net proceeds from (payments on) other long-term liabilities Other (Prior Period Audit Adjustment to Retained Earnings ) Net Cash Provided by (Used in) Financing Activities Net decrease/increase in cash and cash equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year (153) ($153) $6,829 $11,777 $18,606 $0 ($1,483) $13,260 $11,777 ( 1) Write down of assets 31

21 NAFI EMPLOYEES' COMPENSATION & BENEFITS REPORT Military Service: Joint Service Program Group: Supplemental Mission Funds - Stars & Stripes Only Category: Category B - Basic Community Support Activities For the Year Ending: 30-Sep-1 0 $5,736,092 b. Benefits (1) FICA (2) Retirement (3) Other TOTAL 443, ,593 1,674,124 $2,555,321 ""~ ~"als ( 1 ) Payroll - TOTAL (2) Benefits a) FICA b) Retirement c) Other TOTAL $6,172, , ,046 4,869,260 $5,937,144 b. Foreign Nationals ( 1 ) Payroll - TOTAL Benefits - TOTAL ~~ Full-Time Employee Participants c. Part-Time Employees Eligible d. Part-Time Participants